Medina Company produces a single product. The projected income statement for the coming year is as follows:
Sales (40,000 units @ $45) ..........$1,800,000
Total variable cost ......................1,044,000
Contribution margin ....................$ 756,000
Total fixed cost ...........................733,320
Operating income ........................$ 22,680
Required:
1. Compute the break-even sales dollars.
2. Compute the margin of safety in sales dollars.
3. Compute the degree of operating leverage
4. Compute the new operating income if sales are 20% higher than expected.